Inter-State sale test: mere dispatch from another depot for convenience does not convert a local sale into an inter-State transaction.

A sale is not inter-State unless the sale itself occasions movement of goods across State borders; dispatch from another depot for convenience does not change the character of the transaction. Petrol and diesel supplied to a State Transport Department were held to be intra-State sales because the indents were placed at a nearby depot, there was no agreement requiring supply from any particular source, and the company merely moved and stored its own stock before supplying it as required. On those facts, the supplies fell within section 3(1) of the Madras Sales of Motor Spirit Taxation Act, 1939, and the tax liability was upheld.

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Issues: Whether the sales of petrol and diesel made to the State Transport Department were inter-State sales outside the Madras Sales of Motor Spirit Taxation Act, 1939, or intra-State sales liable to tax under section 3(1) of that Act.

Analysis: The determining factor was whether the sale itself occasioned the movement of goods from one State to another. The supplies were made from the company's Trivandrum depot largely for convenience, the indents were placed there because of proximity to Kanyakumari, and there was no agreement requiring supply from any particular source. The company transported its own stock in its own lorries, stored it in its own pumps, and supplied it as and when required. On these facts, the transport was not integrated with the sale so as to give the transaction an inter-State character.

Conclusion: The sales were intra-State sales and were rightly taxed under section 3(1) of the Madras Sales of Motor Spirit Taxation Act, 1939.

Final Conclusion: The challenge to the assessment failed, and the tax liability was upheld.

Ratio Decidendi: A sale is not an inter-State sale unless the sale itself occasions the movement of goods across State borders; mere dispatch from another depot for convenience does not convert an intra-State sale into an inter-State transaction.

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